What types of arrangement does the law recognize which allow occupation and use of real property for a limited period of time?
There are two main types of arrangement allowing a person, company or other organization to occupy real estate for a limited period of time without buying it outright.
The first is a lease, which grants the right of exclusive possession of the property for an agreed period of time. A lease confers on the lessee contractual rights and a proprietary interest in the property, which can be transferred to a third party subject to specific restrictions set out in the lease.
The second is a licence which grants permission to occupy the property. Unlike a lease, the occupier of a property under a licence does not have a proprietary interest or the right to exclusive possession. A licence is not generally transferable to a third party nor is it binding on a successor in title of the person giving the licence, that is, the licensor. In addition, under a licence the period of occupation does not have to be fixed and it creates no interest in land.
In granting a licence, property owners need to ensure that they are not inadvertently granting a lease. The courts will not consider whether the document is called a lease or a licence but will instead look at the substance of the agreement to determine whether it constitutes a lease or a licence.